TMI Blog2024 (3) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... se of manufacture of finished goods or services then even if, waste and scrap arises in course of production and manufacture over the norm then same is also exempt from the duty of custom leviable or the additional duty. Appeal allowed. - HON'BLE MEMBER (JUDICIAL), MR. SOMESH ARORA AND HON'BLE MEMBER (TECHNICAL), MR. RAJU For the Appellant : Shri Manish Jain, Advocate For the Respondent : Shri Sanjay Kumar, Superintendent (AR) ORDER SOMESH ARORA The present set of appeals involve common issue. For reference of details appeal of M/s. Deep Recycling Industries Vs. Commissioner of Central Excise-Rajkot bearing appeal No. E/11738/2013 has been chosen. In all the EOU s common issue involved (in the bunch litigation) is that they imported mix metal brass scrap and produced various items from the same. For the purpose of wastage, SION norms by DGFT were taken and applying the same, for excess of wastage over permitted, department worked out that 10.841 tones of excess imported scrap was used during impugned period by M/s. Deep Recycling Industries and was therefore to be subjected to duty. 2. The wastage norm was applied by the department after segregation of scrap in which plas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) No. 26/98-Central Excise ( NT), dated the 15th July, 1998 or No. 46/2001-Central Excise ( NT), dated the 26th June, 2001 or cleared to the warehouse authorised to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to the holders of certificate from Apparel Export Promotion Council and Council for Leather Export for duty free imports as referred to in clause (e) of the paragraph 6.9 of the Export and Import Policy, without payment of duty. (Emphasis Supplied) 4.2 It was submitted that para 3 of the concerned Notification has a non-obstante clause as it starts with the word notwithstanding anything contained in this notification . 4.3 Thus, it was submitted that there is no dispute that waste generated was cleared in DTA on payment of applicable duty of customs with permission of Development Commissioner. Thus, demand of customs duty on imported inputs is not sustainable. The issue is thus covered in favour of appellants by decision in case of Meridian Impex Vs. CCE ST, 2018 (7) TMI 865-CESTAT as confirmed by Hon ble High court of Gujarat in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cil and Council for Leather Export for duty free imports as referred to in clause (e) of the paragraph 6.9 of the Foreign Trade Policy, without payment of duty : 14. Interpreting the said provision, the Ld. Commissioner (Appeals) observed that even if the imported goods are used in the manufacture of the finished goods (including by products, rejects waste and scrap arising in the course of production, manufacturing processing or packaging of such goods) even if not exported, are allowed to be sold in DTA, in accordance with the Exim Policy on payment of appropriate excise duty leviable thereon, the exemption Notification No. 53/ 2003 Cus. dated 31/03/2003 cannot be denied. In the present case, the scrap generated during the course of segregation/manufacture of brass articles had been permitted to be cleared in the DTA by the Development Commissioner and the Appellant-assessee had cleared the scrap pursuant to the said permission and discharged appropriate excise duty on its sale. Hence, demanding customs duty foregone on the excess quantity of imported scrap worked out on the basis of the Norms fixed by the Committee, in our view, is not sustainable in law. We summarize our findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Excise Act, 1944. Thus, waste and scrap arising in the course of production or manufacture of finished goods are also exempt from the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under Section 3 of the said Customs Tariff Act. Reverting to the facts of the present case, as noticed hereinabove, the segregated waste has arisen in the course of production/manufacture of the finished goods viz. brass articles; the Commissioner of Customs has recorded that the segregated waste had in fact been cleared on payment of duty after being duly permitted by the Development Commissioner in accordance with the provisions of the EXIM Policy. The requirements of clause (3) of Notification [No.] 52/2003-Cus., dated 31st March, 2003 are therefore, wholly satisfied. Under the circumstances, there does not appear to be any legal infirmity in the view adopted by the Tribunal. 5.1 It was submitted that the Order of the High Court must be given effect by the lower authorities until and unless the same is stayed by the Supreme Court. Further, mere filing of the Special Leave Petition does not amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted by Revenue to deny the benefit of notification, on the sole ground that the same is more than the laid down norms, is not justifiable. We find that the Tribunal in case of M/s. RLC Engineers (P) Ltd. v. CCE, Thane - 2006 (203) E.L.T. 105 (Tri-.Mumbai) dealt with an identical question and held that the duties of Customs cannot be recovered on the inputs contained in such wastage which arose in the excess of norms. As such, we do not find any reason to either uphold the duty or confiscation of the gooes, or to impose any penalty upon the appellant. It was submitted that the imported inputs are consumed in EOU and utilized for the manufacturing operations in bonded warehouse. Thus customs duty demand is not sustainable on bonded goods which are used in customs bonded warehouse. 6.1 It was submitted that customs duty can be demanded only on the finished goods or goods which go out of the EOU not on the inputs which come into the EOU. In this regard, reliance was placed on the cases of Paras Fab International versus CCE Kandla- 2010 (256) ELT 556 (Tri. - LB) and M/s Eurotex Industries Exports Ltd. Vs. Commissioner of Customs, Nhava Sheva, 2016 (10) TMI 75- CESTAT Mumbai. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the permission granted by Development Commissioner. The reason for the same is that there is no case for the removal of raw materials as such and duty is to be demanded on the final product. The reliance was placed on the decision of Commissioner of C. Ex. Cus., Surat Vs. Raju Fabrics, 2008 (231) E.L.T. 655 (Tri. Ahmd.), affirmed by Supreme Court in 2016 (339) E.L.T. A148 (S.C.), Commissioner of C. Ex., Surat Vs. Angana Textiles Pvt. Ltd., 2009 (234) E.L.T. 506 (Tri.- Ahmd.), affirmed by Supreme Court in 2016 (338) E.L.T. A154 (S.C.) and Commissioner of C. Ex., Surat Vs. Indian Polyfins Ltd., 2016 (335) E.L.T. 732 (Tri.- Ahmd.) affirmed by Supreme Court in 2016 (335) E.L.T. A213 (S.C.). 6.3 It was submitted that Chapter 6 of the Foreign Trade Policy (hereinafter referred to as FTP ) nowhere mentions that for the excess generation of waste and scrap, duty equivalent to the duty on proportionate quantity of imported raw material is required to be paid. Chapter 6 of the FTP provides that there should be no duty demand even in case where the waste or scrap is destroyed in EOU. Further, it was also stated that the by-products included in the LOP can be sold in DTA with the permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom a warehouse at the expiry of the period permitted under section 61; iii) where any warehoused goods have been taken under section 64 as samples without payment of duty; and iv) where any bonded goods have not been cleared for home consumption or exportation or are not duly accounted for to the satisfaction of the Customs. Development commissioner while intimating the norms has directed industry to pay applicable customs duty on value of waste in case excess waste is generated 8.1 It was submitted that while intimating the wastage norms, development commissioner has directed the industries to pay applicable custom duty on the value of excess waste so cleared it in excess to the specified norms. It does not provide for payment of customs duty on inputs contained in such excess waste and scrap. Therefore, appellant have sought setting a side of the impugned order as in any case wrong duty has been demanded in S.C.N. The Learned Advocate thus pleaded that such a course of action becomes justified, as there are always some invisible losses, which becomes difficult to recover or to make available for clearance and the onus to show removal which is on the department cannot discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as been correctly pointed out by the learned advocate for the appellant the Clause (3) of the relevant notification i.e. 52/2003-Cust specifically provides exemption to the goods which are imported into India and are used for the purpose of manufacture of finished goods. The condition for exemption, therefore, is such imported goods should be used for the purpose of manufacture of finished goods. In the instant case, the department is not in denial that the goods imported were all actually used for and issued for manufacture. The dispute is only about 10.841 MTs of imported material which as per the department have been excess consumed. There is no allegation or evidence, that the same has been diverted to or removed into Domestic Tariff Area. The waste arising in the manufacturing process and physically available has been duly cleared on the applicable excise duty. Therefore, we find that the dispute falls within the parameter of Clause (3) of the relevant notification and the decision quoted by the appellant including of Hon'ble Gujarat High Court is applicable and the case law quoted by the revenue are distinguishable or per incuriam. In our view, clause (3) of the Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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